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Tuesday, February 26, 2013

Today, I wanted to post the first of a two-part series on the hepatitis B virus (HBV) candidate by Arrowhead Research which is set to enter clinical development in the first half of this year. But as if on cue, the company just announced the publication of extremely potent ('multi-log') reductions in gene expression with their systemic DPC delivery technology. This thus bodes very well for what is shaping up to be an RNAi Therapeutics pipeline highlight: ARC520 for the treatment of chronic hepatitis B viral (HBV) infection.

Are you wondering what could be the next HCV-type or maybe even larger drug development
opportunity? HBV may well be the new
HCV. With HCV increasingly curable, the pharmaceutical industry has increased appetite for finally also developing a cure for chronic HBV. Based on the potent
preclinical data with DPC delivery technology and the view of thought
leaders in the field that the specific suppression of HBV proteins may be the single most promising mechanism by which this can be
achieved, I am more and more thrilled by
the prospect that ARC520 could
become a poster child for an RNAi Therapeutics that addresses a major public
health burden.

In anticipation of the March webinar by Arrowhead where the
company wants to talk more about the concept behind ARC520 and their most
recent data on the drug candidate, two blog entries over the coming week will
first explain the rationale for why HBV is such an attractive RNAi Therapeutics
opportunity and then discuss the features that make ARC520 a particularly promising (including in a commercial sense) RNAi Therapeutics
candidate.

Only RNAi Can
Suppress HBV Proteins in a Specific, Potent, and Rapid Manner

About 2 billion worldwide are infected with hepatitis B
virus (HBV). 300-400 million of these have subsequently developed chronic HBV, meaning that they are at
increased risk of prematurely dying from liver-related complications such as
cirrhosis and liver cancer. Every year, more than one million chronic HBV
patients die of such complications. In
East Asia and developing countries where mother-to-child transmission is the
predominant (and highly effective from a viral point of view) mode of
infection, HBV is responsible for more than half of primary liver cancers; in
Western countries where transmission largely occurs via body fluids,
esp. blood, it still accounts for about one quarter of cases.

This means that the public health burden of chronic HBV
infection already surpasses that of HCV and is extending its lead as the new direct antiviral agents against HCV prove quite effective at eliminating HCV. An
important difference between HBV and HCV is that HBV is a DNA virus that will
persist for life in hepatocytes. This explains we can only dream of a ‘functional’
cure, not a cure full-stop. HCV, by contrast, is an RNA virus which, in the absence of replication, will
disappear due to the relative instability of RNA.

Vaccination works almost 100% well to protect us from HBV infection. but its therapeutic application so far has failed and it also does not address mother-to-child transmission. Interferon and viral polymerase inhibitors (nucs) are currently only recommended
for those with active chronic HBV as determined by increased liver enzyme
levels in the presence of HBV. These drugs, however, only work
to convert 10-30% of those treated into the inactive carrier state with normalized liver enzymes and very little HBV DNA in the blood. Nucs have the
added benefit of very effectively inhibiting active viral replication, meaning
that it does a good job at minimizing the ongoing inflammation in the liver. Unfortunately, only very few of these
patients can be considered to be cured and they are thus still at risk for viral
re-emergence.

It is widely accepted that a functional cure for chronic
HBV, meaning viral suppression in the absence of drug treatment, can only be
achieved by harnessing adaptive immunity. Here, the
name of the game is achieving hepatitis B surface antigen (HBsAg) seroconversion, meaning the development of
antibodies to HBsAg. People who stably carry such antibodies can be considered cured. Although the exact
mechanism by which this is supposed to occur is being debated, it is widely
accepted that immune exhaustion due
to the presence of abundant HBsAg in the serum in the
form of subviral particles and in the liver is the cause of why our immune system tolerates HBV,
instead of eradicating it.

While nucs, which inhibit viral polymerase, not mRNA transcription of viral mRNA which is performed by our own
RNA polymerase II off the viral cccDNA, and interferon can have some suppressive effect on HBsAg levels
(on the order of ½ log), it seems that RNAi Therapeutics is the only means to achieve the specific, potent, and rapid inhibition of HBsAg that is considered to be necessary for a
successful relief from immune exhaustion. In
doing so, an RNAi Therapeutics can do everything that a nuc can do and
more. This means that such an RNAi
Therapeutic may also significantly expand the pool of chronic HBV patients on
therapy and should become a core component in any combination therapy such as
with an interferon.

Look out for the next post on why I think ARC520 is an excellent RNAi Therapeutics candidate to achieve the stated objective.

Thursday, February 21, 2013

If you believe, like I do, that the RNAi Therapeutics money ought to be
in delivery, the track record suggests that you are mistaken: with the exception of what was euphemistically referred to as a $65+10M 'restructuring' of the agreement between Tekmira and Alnylam, over the last 4 years there has not been one deal
where an RNAi delivery company reaped substantially non-dilutive funding for
their delivery technology. By contrast,
the money was to be made in RNAi triggers and especially in
partnering/licensing out RNAi Therapeutics candidates (for more details, see the RNAi Therapeutics in 2013 Report).

The failure of companies like Tekmira, Arrowhead Research,
Silence Therapeutics, and Marina Biotech (plus many others not so much in the
spotlight), to capitalize on the uncontested value of delivery may be due to
one of the following factors:

1) their respective delivery technologies do not meet the expectations
of the pharmaceutical industry;

2) RNAi Therapeutics has lost its attraction as a platform
technology. Consequently, an investment in platform technologies such as
delivery is not compelling;

3) Potential partners want a One-Stop Shop. Licensing in
delivery AND the RNAi triggers separately can be burdensome and may mean decreased
potential profits down the line (royalty stacking);

4) intellectual property issues around the payload when monetizing
delivery; Alnylam and ISIS have famously sued Tekmira for their delivery deal
with BMS (litigation terminated now) claiming that Tekmira was indirectly selling
RNAi triggers it did not own.

I believe that all the above factors have contributed to some
degree with the relative weight of the issues varying depending on the specific
technology, geographies, and other company-specific factors such as the trade
secret litigation between Tekmira and Alnylam that has delayed deal flow related to the most advanced RNAi delivery technology.

However, RNAi Therapeutics is regaining favor as a platform
technology and I am hopeful that this will translate into the long overdue
transactions, also involving the SNALP and DPC technologies by Tekmira and Arrowhead Research, respectively, which have technologies of clinical maturity (disclosure: I am a shareholder of both companies). The two most likely customers here are
Novartis and Merck. Novartis has an
active interest in RNAi Therapeutics, but the scientific and patent literature
suggest that they have no tangible delivery technologies and their internal
efforts are not even half-hearted so that I expect them to go out and buy in the
technology instead of replicating Merck's inreasingly costly mistake of investing hundreds of
millions in internal delivery research, including SNALP and DPC lookalikes,
when the combined market caps of the originator companies is a fraction of
that (please somebody explain that logic to me).

Nevertheless, RNAi delivery companies cannot rely on such
platform partnering and need to push ahead with creating RNAi Therapeutics
candidates. This last mile is currently the most rewarding way to monetize on their delivery technologies. Alnylam has long understood this (see recent partnering around TTR, PCSK9 and VSP), and is now reaping the
rewards.

What Alnylam has done, however, is no magic, far from it: identify
genetically attractive gene targets, formulate into established delivery tech (e.g.
SNALP, GalNAc), and do some biology around them to build a scientific story to be sold to the pharmaceutical and investor world. With an established delivery technology, the
hard work, or maybe better, the most uncertain factor has been removed, so it's
pretty smooth sailing from there as long as the gene target is good and desired by the industry.

It is thus ironic that platform companies get loved for
their specific product candidates (not just in RNAi Therapeutics it seems), and
not for the technologies that critically enabled them. For RNAi delivery
companies, it is important to swallow this scientific toad and invest the
additional $5M or so it takes to build that IND-enabled package to reap disproportional rewards.

Sunday, February 17, 2013

Warning: disorganized thoughts gathered on a long plane ride. Having followed the development of RNAi
Therapeutics since it took off in 2001, I submit that its trajectory continues to strongly suggests that it will become an important new class of drugs. I am not saying that capital has always been well spent and that the field has been free from scientific and securities
'fraud' (meant in a broader sense). However, from a 30.000 feet level, a dozen years
from the demonstration of RNAi activity in mammalian tissue culture cells to demonstrating
potent gene knockdown in Man following systemic administration is more than
satisfactory progress.

If the sound of a dozen years makes you uncomfortably aware
of your own mortality already, then consider that nearly two dozen years have
passed since the RNAi phenomenon was first described in plants- and it still feels to me like it was yesterday, especially with the lightning speed with which our understanding of the RNAi mechanism unfolded between 1996-2006.

With the momentum fairly intact, certainly somewhat dented by a financially
trying spell (2009-12), I expect that RNAi Therapeutics will have real
clinical impact over the next dozen years. In addition to the marketing approval of orphan drugs, RNAi should make deeper inroads into public health by addressing widespread diseases such as metabolic disease and hepatitis B.

There are, of course, also fundamental challenges that could
hold up progress in RNAi for knockdown in certain tissues where we don't even have a good idea to start with on how to theoretically overcome the biophysical
obstacles in reaching and penetrating them.
Until that becomes rate-limiting, however, there will be plenty of work
to be done in exploiting the already existing therapeutic opportunities that come with the
ability to silence genes in a few tissues.

Not just the science

Unfortunately for investors, this optimistic long view for the
technology is no assurance of financial success. We have seen great volatility and an industry
shakeout during which a number of companies either went bankrupt or as a result
of which existing shareholders were wiped out following a reorganization. In fact, we are not
entirely through this period and it will be interesting whether and how some of
the remaining first-generation RNAi Therapeutics companies will come out of the past crisis and re-establish themselves as bona
fide pharmaceutical companies.

In addition to the sector sentiment swings and turmoil in the wider economy that can wipe out
shareholder value without the direct fault of companies, it has also dawned on me, how scientific illiterate managements can destroy valuable science or fail to seize upon obvious opportunities. Does the old management of RXi
Pharmaceuticals perhaps realize that they were on the right track with their
'self-delivering' chemistries, but for the really stupid decision to stay below
15bp dsRNA lengths for putative, and at that European IP issues, other
companies are going to eat the self-delivering cake now? Scientific illiteracy can be forgiven as it does not suggest willful mismanagement. Worse are cases where companies have become the personal ATMs of Directors, managements and close friends with retail shareholders helplessly
watching how their equity is taken away from them.

In addition to scientific illiteracy and the violation of fiduciary duties, the value of
good science may also fail to be exploited because especially science-focussed, early-stage biotech companies do not understand the full value chain of drug
development and commercialization. A
related commentary was made about John Maraganore when Fierce Biotech selected
him as one of the top 25 influential people in biotech. Even if I am vigorously opposed to what I
considered unethical and monopolistic business practices, I admit that JM's mathematical
product of scientific insight times financial market savvy must be one of the
highest in the industry.

Needless to say, such a talented person would look pretty
stupid if he found no supporters on Wall Street and if he weren't in touch with
the people and institutions driving health policy. He also needs to exude the type of confidence
that Wall Street associates with success. If you believe you have a great technology and
that you 'ought to' become a major pharmaceutical company, better line
up your financial and other supporters before starting to invest
accordingly. An important lesson that
I've learned on this journey is that if you just call, they won't necessarily
come.

Investment Principles

Considering that in terms of a financial investment the translation of RNAi Therapeutics into marketed drugs is taking a long time which increases the risk of getting wiped out along the way, my current working philosophy for investing in the sector is taking into account the following factors:

1) pure-play RNAi Therapeutics companies with a hot, clinically mature delivery technology in the industry, hotness also reflected by the buzz the technology is generating in the industry;

2) one or two flagship products that capitalize on the strengths of RNAi Therapeutics and their specific technologies and which can capture the imagination of healthcare investors (RXi has famously taken years and years to bring their first RNAi Therapeutic candidate into the clinic and failed to live up to expectations of becoming No. 2);

3) a vibrant, yet capital-efficient lab to maintain tech leadership and support potential partnerships (sorry Marina and Benitec shareholders, without a lab keep waiting for that blockbuster partnership deal);

4) a small market cap such that a non-dilutive funding event can generate explosive returns, but not too small to avoid a financing death spiral (a caveat is that from an institutional investor perspective small market caps can be prohibitive);

5) a seasoned, well-connected and yet hungry management that I feel are good stewards of shareholder value and are respectful of retail shareholders (good luck finding that);

and last, but not least 6) avoid exposing a large position to binary events unless you have reeaaal conviction about its outcome.

All of the above, of course, can only be food for thought as different backgrounds necessitate different investment strategies.

Sunday, February 10, 2013

It is remarkable that Alnylam seems to be embracing GalNAc
subcutaneous delivery for all pipeline candidates, but for perhaps ALN-TTR02, that are most important to its 5x15TM
development and commercialization strategy: ALN-TTRsc (TTR amyloidosis),
ALN-AT3 (hemophilia), and ALN-AS1 (acute intermittent porphyria). Considering that gene knockdown has not been
demonstrated in Man with GalNAc conjugates, and potency could be a critical
issue determining whether this really is a subQ approach, this apparent high-risk
strategy is uncharacteristic of a company with the laudable attitude of
raising capital when the company does not need it.

ALN-TTRsc: The Missing
Clinical Trial

One possible reflection of the fact that management does not
really feel as confident about the strategy as it may seem, is the missing entry of the ALN-TTRsc phase I clinical trial on
clinicialtrials.gov (and other registries I looked at).

I like to look at clinical trial registries, esp.
clinicaltrials.gov, also for the reason that information contained therein often provide interesting clues into otherwise undisclosed safety and efficacy
issues. For example, is it a single
and/or multiple dose, what are the dosing ranges, etc.

With ALN-TTRsc, I do not expect safety to be necessarily the
dose limiting factor. Rather, it may well
be the ability to show robust efficacy with an injection volume of 1ml or less,
the magic upper limit for subQ approaches.
It turns out that adequate efficacy was seen in non-human primates only
starting at 2.5mg/kg which apparently corresponds to the 1ml volume in humans. Moreover, the dose-response curve is
relatively shallow making it difficult to extrapolate predicted doses from
preclinical models into humans (being off by a factor of 2 in the ED50 could already prove disastrous).

Is the omission to list ALN-TTRsc on clinicaltrials.gov an attempt at hiding that the dose escalation schedule indicates that 2.5mg/kg is an optimistic guess? Of course, the secrecy
could also be for competitive reasons in light of its race with the competing
antisense approach by GSK-ISIS. But for
a company that so far has listed every clinical trial, including ALN-TTR01 and
ALN-TTR02 all of which have been conducted exclusively outside the US, there will be a reason for it and
doubts about GalNAc potency is a plausible one.

GalNAc Steals
Spotlight from DPCs

Recently, Arrowhead scientists presented impressive subQ
hepatic knockdown data with the DPC polyconjugate platform. While the response to the presentation at the
Oligonucleotide Society Meeting in Boston
last year was tremendous, possibly the most enthusiastic one among all the presentations (and one of the reasons why I am bullish that there is wider industry demand for DPCs), Arrowhead has been getting no love from the
financial markets, thus putting it at a disadvantage in any licensing
negotiations. One factor for that might
be GalNAcs which take away in the typical investor’s mind the uniqueness about
it being a subQ RNAi delivery approach. So if Alnylam eventually
realizes that it needs an alternative, it might get access to it on more
affordable terms. The phase I ALN-TTRsc
results expected mid-year could be the critical event in that dynamic: poor
results would benefit Arrowhead Research.

GalNAc Plus

Of course, the confidence in GalNAcs may rest in the
knowledge that ALN-TTRsc is actually the pipeline candidate with the weakest
potency, and if IT shows efficacy, it will be a stroll for all the others. These apparently have proven to be more potent in preclinical studies.

I consider this a possibility, but am not
fully convinced that these conjugates can really be called GalNAc-siRNA conjugates. This is because the TTR siRNA
is a particularly potent one already and I am wondering how you would achieve a 10x
increase in potency from ALN-TTRsc to ALN-PCSsc with stabilizing nucleic acid chemistry
alone. Moreover, it is a small miracle already that a simple siRNA with a targeting ligand can achieve ED50s in the low mg/kg,
because the related cytoplasmic release would likely rely on spontaneous endosome rupture (miracle probably explained by the high volume ASGPR
receptor-mediated trafficking).

Consequently, my feeling is that the GalNAc Plus conjugates involve additional
functional moieties beyond stabilizing chemistries such as 2'-o-methyl and 2'-F…such as endosomolytic activities. In a 2009 patent application by Manoharan et al. (WO 2009/126933) such endosomal release
activities, melittin included, were indeed contemplated in the context of
GalNAc-siRNAs. In fact, the claims would
cover GalNAc-targeted DPCs such as the one described in the Mirus/Arrowhead in the
2007 PNAS paper (Mirus cientists Publish Elegant Paper on Targeted siRNA Delivery to Hepatocytes).

The patent application, somewhat of an attempt at an early
land-grap being devoid of any actual experimental data, is not very remarkable
really as it is obvious to somebody skilled in the art that in order to significantly enhance
GalNAc-siRNAs such functionalities will be highly desirable, so a lot of it would come
down again to chemistry and figuring out which exact compositions
are functional and safe.

In my mind, it is fair game to pursue promising (delivery) technologies,
especially under the Research Exemption in the US. However, as the Tekmira-Alnylam relationship has
shown, it is foolish for two companies to collaborate on delivery when both are working on GalNAc
conjugates internally. At best, the
technology is useless and the whole thing will be forgotten. At worst, the technology is valuable and both
parties will try to control it and not pay the other party their dues.

Overall, I think that betting the farm on GalNAcs is taking on more risk than warranted considering the advancements and validation achieved
with SNALP technology. Also, if Alnylam
considered the subcutaneous approach to be that much more attractive than
intravenous, you would
think DPCs are the logical fall-back, if not more desirable than simple GalNAcs. But maybe GalNAc Plus and DPCs are not all that
dissimilar and we are on the same page after all.

Note added in proof (March 27, 2013): the ALN-TTRsc clinicaltrials.gov entry has now appeared. As expected, however, no insights were provided into the dosing range. Only interesting tidbit: the volume of the placebo injection will be matched to that of ALN-TTRsc. Injection volumes will be critical.

Tuesday, February 5, 2013

Yesterday, Alnylam made the somewhat surprising announcement
that it partnered with the ~$1.6B market cap The Medicines Company to develop
and commercialize its RNAi Therapeutic program targeting PCSK9 for
hypercholesterolemia. This program includes ALN-PCS02 which had completed a phase I study last
year and contemplates subcutaneous formulations, too.

This means that as a number of PCSK9 monoclonal antibodies are moving forward in clinical development at lightning speed, including phase III trials involving more than 20k patients, the ambition here is not to have
a Big Pharma try and catch up (maybe they did try, but nobody was willing to
partner), but to carefully study the experiences of the monoclonals and exploit the biological
differentiation that an RNAi approach offers over antibody. With The Medicines Company on
board, some of that potential at least is seen in the hospital setting.

Mechanism of Action of RNAi vs Antibody

There are various points of differentiation which might
translate into a clinical benefit for RNAi. Expect the companies to look hard
for such evidence and, if found, beat the drum about it. These differences
include: 1) reduction of both intra- and extracellular PCSK9 thus replicating
human genetics from which PCSK9 emerged in the first place; antibodies merely
bind existing extracellular PCSK9; 2) because antibodies form complexes with
their targets and do not act catalytically, the percent target inhibition
efficiency of antibodies depends on target abundance; therefore, in patients
that have many more PCSK9 molecules than the number of antibodies you can fit
in a subQ syringe, PCSK9 antibodies will not work well; RNAi, however, works with similar percent knockdown efficiency more or less regardless of target gene
expression levels.

Efficacy

In general, the LDL cholesterol reductions with monoclonal
antibodies have been between 40-70% in multi-dosing regimens. In Alnylam’s single-dose phase I trial, the liposomal
ALN-PCS02 achieved a ~30% reduction (area under the curve).

Frankly, given the number of clinical trials involving PCSK9
monoclonals, I have given up tracking the results of each and every study. Having said that, in reviewing the phase II trials of the candidate that may be viewed as the most advanced/exciting one, AMG145 by Amgen, it seems that the higher end of LDLc reduction was only achieved when given on top of statins. Althought to me this seems a bit counterintuitive since
statins are thought to act mechanistically essentially the same as PCSK9 inhibitors, namely
via increasing LDL-receptors on hepatocytes, that's the way it looks right now, and the ALN-PCS02 trial may have
been disadvantaged as it was mono-therapy.

Finally, with continued improvements in the potency of RNAi
Therapeutics technologies, it should be possible to achieve similar LDLc
reductions with RNAi as with PCSK9 antibodies.

Acceptance

I like the fact that PCSK9 has become a small battleground between
RNAi and monoclonal antibodies as this may be the best way for RNAi
Therapeutics to work on its wider acceptance by the medical and investor community. Notably, the often glorified monoclonals
frequently suffer from injection reactions (some notable serious ones were observed in Regeneron’s PCSK9 trials), other immune-related issues and manufacturing
challenges to name a few issues. RNAi
Therapeutics, of course, are facing some of the same challenges, but it irks me that when
it comes to this technology, they suddenly are supposed to be show-stoppers.

Financials

The financials (including a $25M upfront, up to $180M in
sales and commercialization milestones and double-digit royalties) were not all
that exciting for Alnylam and reflect the fact that only one single-dose phase I trial had
been conducted. Also, as Alnylam cannot
claim a blocking IP any more and has licensed hepatic targeting rights to other
companies, including Roche/Arrowhead, the value of ALN-PCS as the only RNAi
candidate for PCSK9 has been lost.

Still, $25M is serious money for a company the size of The
Medicines Company and you do not turn this over just to help out an old
friend.

Disclaimer: This blog is not intended for distribution to or use by any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the author or any of his collaborators and contributors to any registration or licensing requirement within such jurisdiction. This blog expresses only my opinions, they may be flawed and are for entertainment purposes only. Opinions expressed are a direct result of information which may or may not be accurate, and I do not assume any responsibility for material errors or to provide updates should circumstances change. Opinions expressed in this blog may have been disseminated before to others. This blog should not be taken as investment, legal or tax advice. The investments referred to herein may not be suitable for you. Investments particularly in the field of RNAi Therapeutics and biotechnology carry a high risk of total loss. You, the reader must make your own investment decisions in consultation with your professional advisors in light of your specific circumstances. I reserve the right to buy, sell, or short any security including those that may or may not be discussed on my blog.